The US Dollar Index (DXY) slipped below the 99.00 mark early Wednesday in the European session, trading near 98.90 after three consecutive days of gains. The greenback weakened amid renewed uncertainty over the US federal government shutdown, which continues to weigh on investor sentiment.
The shutdown has now extended into its 22nd day, after the Senate failed once again—for the 11th time—to pass a House-approved funding bill to reopen the government.
The vote, which ended 50–43, largely followed party lines. Prolonged gridlock in Washington is eroding confidence in the government’s fiscal management, adding pressure on the USD.
The suspension of key economic data releases from the Bureau of Labor Statistics and the Census Bureau due to the shutdown has also complicated policy assessment for the Federal Reserve (Fed). According to the CME FedWatch Tool, markets are now pricing in a 98.9% probability that the Fed will deliver a 25 basis-point rate cut at its October 29 policy meeting, slightly down from 99.4% the previous day.
On the geopolitical front, attention remains focused on US-China trade relations. President Donald Trump reiterated optimism late Tuesday about reaching a “good deal” with Chinese President Xi Jinping, but also acknowledged that the long-awaited meeting “may not happen.” Meanwhile, US Treasury Secretary Scott Bessent is set to meet with Chinese officials to discuss de-escalation efforts ahead of the formal trade talks.
While optimism over progress in US-China negotiations could offer short-term support to the dollar, broader downside risks persist amid political deadlock and growing expectations of a dovish Fed stance.
